Stuff

1) The Labour lead narrowed

Labour’s lead has gradually eroded over 2013. We started the new year showing a Labour lead of around about ten points. It started falling in the spring as the economy improved, and continued over the summer. There appeared to be something of a reverse in the autumn, one assumes because of the impact of Labour’s energy pledge and the political narrative focusing on gas and electricity prices for a few weeks, but we still ended the year with an average Labour lead of six points, compared to ten. Note however, that the majority of this change came from Labour losing support, dropping from an average of 42% in the polls to 39% – there has been comparatively little increase in Tory support.

2) People got more optimistic about the economy

There has been a sharp increase in people’s view of where the economy is growing. Looking at the monthly questions MORI and NOP both ask on how people think the economy in general will perform in the twelve months ahead shows a sharp increase early this year, thought it has rather stagnated since September. Asked in a more narrative way, earlier this month YouGov found 43% of people now think the economy is showing signs of recovery or is well on the way to recovery, up from 37% in August and just 14% in April.

However, people are less optimistic about their own household finances. YouGov’s economic optimism tracker for the Sunday Times asks about people’s expectations of their own finances, rather than the economy in general, and while it has shown a similar rise the net figure is still much more negative. In November MORI asked the two questions in parallel – 42% expected the economy to improve in the year ahead, but only 23% expected their own finances to improve. In a similar vein YouGov found 35% of people thought the economy as a whole was growing, but only 22% thought it was growing in their own region. More and more people are thinking that the economy is growing, but people are not necessarily feeling in their own pockets yet.

3) The Conservatives have moved ahead on the economy

As the economy has improved, it has had an impact on political attitudes towards the economy. At the start of 2013 the Conservative and Labour parties were essentially neck and neck on the economy. As the year progressed the Conservatives gradually pulled ahead and established a consistent lead.

Other trackers have moved in the same direction. Since the end of 2010 YouGov’s fortnightly trackers on attitudes towards the cuts had consistently shown that while people thought the spending cuts were necessary, they thought they were bad for the economy. That reversed in September and now finds more people think that the cuts are good for the country’s economy, than think they are damaging. However, while preferences on who people trust to manage the economy are heading in the Conservatives direction, Labour still lead on their preferred ground of prices and living standards.

4) But people have started to care more about other issues

The two regular trackers of what people think are the most important issues facing the country (YouGov’s which offers a list and Ipsos MORI’s which is unprompted) have both had the economy as the number one issue for years, and it remains there at the moment. However, it’s dominance has begun to fade over 2013. Back in 2012 well over 50% of people consistently told MORI that the economy was one of the main issues facing the country, YouGov’s prompted question consistently found over 70% picking out the economy.

In 2013 both trackers have shown the proportion of people thinking the economy is one of the big issues facing the country falling, presumably as a result of people starting to think the economy is improving. In the case of MORI the proportion of people saying the economy is a big issue has fallen below 50%, and in their December poll down to 39%. On YouGov’s tracker the figure has fallen below 70%, and in their final December poll down to 58%. At the same time other issues have risen up the agenda, most notably that of immigration – in MORI and YouGov’s December polls they both found immigration the second most mentioned issue, in both cases just two percentage points behind the economy. Note also the increase in the number of people mentioning issues of inflation from Autumn, as Labour started to try and shift the agenda more towards cost of living.

5) UKIP have continued to gather strength

The advance of UKIP in the polls has continued, though perhaps hampered by the lack of any elections or by-elections in the second half of 2013. UKIP’s support so far this Parliament has been a series of spikes and plateaus, seeing sudden increases in their poll ratings on the back of election successes like Rotherham, Eastleigh and local elections and the ensuing publicity and then flattening out again until the next opportunity to demonstrate their support comes along. This has certainly been the pattern in 2013 – they started the year at just below 10% in the polls, enjoyed a big jump in national support following their successes in the county council elections and, since the publicity boost from the county elections faded have rather stagnated. They still end 2013 above where they started, and have the inevitable publicity boost of the European elections to come next year.

6) Ed Miliband’s ratings went down, and up, and down again

Ed Miliband’s miserable job approval questions have continued to go downwards, with one notable exception. Three companies do regular questions on what people think of the party leaders – MORI ask if people are satisfied or dissatisfied, Opinium if people approve or disapprove, YouGov if they are doing a good or bad job. Ed Miliband’s ratings have been on a downwards trend for most of the year, but he enjoyed a reverse after the party conference and his energy price pledge, briefly reversing some of the year so far’s decline. All three measures still showed him ending the year with lower approval ratings than he began with.

HTB “1” does not involve “guarantees” . The State loans the borrower money at preferential rates, in order to facilitate the requisite deposit.
For the first five years, it is interest-free. In year six, you will be charged 1.75% which will climb at a rate of 1% of that figure plus inflation (retail price index measure) every year thereafter.
Borrowers can choose to repay the equity loan at any time, without penalty. You can pay back either 10% or 20% of the total amount, so long as the loan is worth at least 10% of the value of your home.
If you don’t repay the equity loan while you are still living in the property, when you come to sell it, the government will reclaim its 20% stake in your home at its current value..

This scheme is thus an injection of additional liquidity into the mortgage market-and as we have seen resulted in an imediate increase in qualifying properties-ie new builds.

The State is presumably art risk of default-but presumably no more likely to take a loss on repossession than any other lender with sensible LTV.
Conversely . THe State does have a stake in future house price rises though.
It seems unlikely to me that the Taxpayer has any significant cost risk here-and the only market “distortion” has been the effect on new build houses resulting from the credit backed increase in demand.

HTB “2” involves a State Guarantee -as you say-to the main lender , enabling the latter to accept a 5% Deposit. THe borrower has to demonstrate the usual ability to repay, and therefore there is no distortion of the market in the sense of enabling poor credit risk borrowers.
I have no idea what the cost to future taxpayers here will be -but afgain, given the large equity stake available at repossession it seems to be a moderate risk.

II see no distortion of the market mechanism here, other than the availability of more credit for credit worthy buyers.

Where I do think there is an in-built distortion is the time limited availability of the HTB stimulus. Unless the timing of its withdrawal / phasing out is matched well with a sustainable take off in the general economy , then the sudden withdrawal of what amounts to a chunk of mortgage credit is bound ( it seems to me) to distort the dynamics of demand-and thus supply.

BoE is charged with the first review & it will be very interesting to see their recommendation.